The UK’s wish of re-joining the Lugano Convention, have been dented by the EU’s unusual recommendation for the member states not consent to the UK’s accession application.
EU’s Council will issue a final decision but the member states are not all aligned.
Irrespective of the outcome, the UK and the EU will remain members of the Hague Convention on Choice of Court Agreements. Thus, commercial parties who have given the English courts exclusive jurisdiction should expect their choice of court to be upheld by the courts of England and EU. Any judgments in England should be enforceable throughout the EU.
UK APPLY TO RE-JOIN THE LUGANO CONVENTION
In April 2020 the UK applied to re-join the Lugano Convention, which extends the broad scheme of the EU rules to three non-EU European states: Norway, Iceland and Switzerland.
Although Lugano lacks some of the details incorporated into the EU rules, it would nevertheless allow reciprocal enforcement of judgments in a broader range of matters encompassed by the Hague Convention.
However, the UK’s application “requires” the approval of the existing contracting parties. Norway, Iceland and Switzerland have said ‘yes’ (hooray!), but the EU (and Denmark, which contracted in its own right) appear to be firmly against the notion.
On the 4 May 2021, the Commission recommended against approval (unsurprising). This expected intransigence is not a surprise to the stoic observers.
In press reports last year, anonymous EU officials stated that Lugano membership should be the preserve of countries which, even though outside the EU, still participate in the single market. Needless to say, that this is not a qualifying criterion for accession!
Now it’s for the Council of the EU (i.e. the member states) to make a final shout on the UK’s accession application.
The French were quick to plant the flag of opposition. A senior member of the French government, was overt about the potential commercial benefits of Brexit for Paris as an international disputes centre; for the UK, Brexit had necessary consequences, and in their view access to Lugano must be denied.
Other member states have different views to those of the French e.g. Hungary, of course, and the decision will be subject to qualified majority voting. There is no timetable for a decision.
English exclusive jurisdiction clauses remain a favoured choice, particularly (thank you Hague Convention) where any judgment would need to be enforced across EU states. If the UK accedes to the Lugano Convention, a broader range of English judgments will more easily be enforced across Europe. By the same token, EU judgments would also be enforceable in the UK.
However, even without Lugano, judgments outside the scope of the Hague Convention should still be enforceable but would be subject to less streamlined and often convoluted mechanisms (adding unnecessary cost to businesses).
The benefits of the Hague Convention are expected to drive an increase in parties adopting exclusive jurisdiction clauses rather than non-exclusive or asymmetric clauses in their agreements.
The UK’s relationship with the EU Single Market is still very much a work in progress. COVID has effectively put a hold on formulating the future UK-EU relationship.
Talks will resume, in the near future, we all hope, and as the post-Brexit frenzy settles down, the EU may find it beneficial to have the UK included in the Lugano Convention.